Til death do us part? The truth about gold in the long-run

Last month when gold became a hot money favorite, I started turning near-term bearish. My theory is also based on the idea that the banks and the Fed are likely also wanting gold prices here or lower, but they certainly want gold prices heading no higher anytime soon.

That doesn’t mean that I’m selling any of my own holdings of physical gold and silver coins and bullion. Far from it. I’d welcome yet another opportunity to scale into more physical gold if there were to be another near-term crash in its prices. I plan to own my own physical gold basically for the next ten to fifty years. Let’s discuss.

We know that the developed world’s governments here and around the world are actively engaging in broad-reaching currency wars, mostly trying to keep their currencies weak in the name of spurring export growth and helping transnational conglomerates maximize their reported earnings. We know that the Fed is in way uncharted (and frankly, un-CHARTERED) territory using all kinds of tools like 0% interest rates and QE and so on to artificially repress interest rates and force people to take on excess risk in search of yield.

I’ve been spending a lot of time lately helping retirees try to figure out how to maximize their returns and yield on their money, and trying to find anything safe yielding what historically was a measly 5% is keeping me up at night. These people for whom I’m doing these deep dive analysis on their portfolios, are the real-life examples of investors being forced to take on excess risk in search of yield.

Gold doesn’t give any yield, and therefore it’s probably shouldn’t be a huge part of most retirees’ portfolios. And as the fool Keynes once rightly noted as he lost his shirt once again in the markets, “Markets can stay foolish longer than most people can stay solvent,” which means we don’t know when the long-term imbalances and bubbles that the policies of today will finally hit. But I am extremely confident that before I die sometime in the next forty or fifty or whatever years, that the relative value of physical gold and silver will be up many orders of magnitude when this all unwinds at some point in coming years or decades.

So I do think some physical gold and silver holdings are key to every portfolio, even for retirees, though they would probably want to allocate a much smaller fraction of their portfolio than younger investors, in general.

I prefer gold over silver for the long-term, as I think gold-backed state currencies are likely to make a comeback in future decades, probably at China and/or Russia first.

To get gold exposure, I suggest the following, in order of importance for long-term investors:

1. Buy physical gold and coins and store them somewhere safe where you can access them personally anytime you want. Safes, local bank safety deposit boxes, and even buried in the ground somewhere are not bad ideas. Like I said earlier, I plan to own my own physical gold basically for the next ten to fifty years.
2. Buy some GDX common or some GDX long-dated calls. $GDX is an ETF comprised of actual gold mining company stocks.
3. Avoid GLD and SLV. I don’t think there’s nearly as much actual access to physical gold for all the promises of access to physical gold that $GLD‘s banking industrial complex lets on. That is, there are probably hundreds of paper promises to real physical gold in ETFs and other paper securities for every once of actual physical gold they could redeem. A paper gold ETF/securities “Run on the bank” is probably in the cards at some point in the future, perhaps this or next year or in five to twenty years.

And finally, I’m happy to send anybody who wants a copy of my ebook, Everything You Need to Know About Investing in Gold and Silver, if you just ask in a comment below, by emailing me at support@tradingwithcody.com or by posting a Scuttle requesting one from me on Scutify.